Banks taking lenient line on WorldCom debt, says chief

Telephone giant WorldCom, which is struggling with a $3.85 billion (€3.92 billion) accounting debacle, said last night its lenders had not accelerated the repayment schedule on its credit lines and it aimed to secure a $1 billion funding package to gain a near-term financial cushion.

WorldCom, which has about $2 billion in cash on its books, said it was notified by its banks that it was in default on some of its credit lines.

But it has not been required to immediately repay its $30 billion in debt.

"We did get sort of formality letters that were expected from the banks on termination possibility on our bank loan.

"So far there have been no events of acceleration, no threats of acceleration," said WorldCom's chief executive, Mr John Sidgmore.

"We are working with banks even as we speak here, talking about various proposals to restructure [our finances].

"And we are somewhat optimistic that we will get a proposal, if not two proposals, in hand this week to accomplish that," he said.

The second-largest US long-distance carrier, which stunned Wall Street last week with the announcement that its chief financial officer improperly accounted for $3.85 billion of expenses, said it hoped to have proposals for a financial restructuring this week.

The Mississippi-based company has been charged with fraud by regulators and expects to have its stock delisted by Nasdaq on Friday.

Meanwhile, US Defence Secretary Mr Donald Rumsfeld has dismissed concerns that the mounting woes of WorldCom posed a risk to the US military, one of the company's largest customers.

"I think it's not \ to be a problem," Mr Rumsfeld said.

He said it was likely that services currently provided by WorldCom - including military communications around the world - would continue, even if the company were taken over or entered into bankruptcy proceedings.

In April WorldCom won a $450 million, 10-year contract to build a research network for Defence Department scientists and researchers.

WorldCom grabbed that deal after the Defence Information Systems Agency (DISA) ruled that financial problems at rival bidder Global Crossing posed a risk.

The General Accounting Office last week threw out Global Crossing's protest about the WorldCom award, agreeing that Global Crossing did not have the financial soundness to compete for the project.

It was not immediately clear if other bidders for that project - AT&T and Sprint - would now protest the award to WorldCom on similar grounds.

One government official said it might be too late for any such action now, given that the award was made in April.

Last week the Securities and Exchange Commission sued WorldCom, alleging it covered up $1.22 billion in losses through improperly accounting for $3.85 billion in expenses.

The Bush administration said on Monday it was reviewing contracts with WorldCom and could act to block new deals.

But Mr Rumsfeld said he was not worried that WorldCom's problems posed a risk for existing services it provided for the Pentagon.